Quick look! An in-depth analysis of the supply and demand pattern of the global coking coal market is here.

SMM: from the perspective of global reserves distribution, 50% of coking coal resources are distributed in Asia, 25% in North America, and the remaining 25% in other parts of the world. For a long time, because of its large output, excellent quality and convenient transportation, Australia is not only the main exporter of coking coal in the world, but also the main source of imported coking coal in China. since the second quarter, the import price gap of coking coal has been expanding.

China and Australia are big producers.

There are many kinds of coal resources. in the coal classification of our country, the coking coal which is caking and can be coked is called coking coal, including coking coal, fat coal, gas coal, lean coal, one stroke three coking coal and gas fat coal and so on. Coking coal is relatively scarce in the global coal resources. among the total coking coal resources of about 1.343 trillion tons, the reserves with economic recoverable value are 550 billion-600 billion tons, of which the high-quality coking coal resources with low ash and low sulfur are only about 80 billion tons, and the high-quality resources are relatively scarce.

In terms of global reserves distribution, 50% of coking coal resources are distributed in Asia, 25% in North America, and the remaining 25% in other parts of the world. From a national point of view, the order of reserves from large to small is Russia, accounting for 42%, China, accounting for 24%, the United States, accounting for 18%, other countries accounting for relatively small, the United Kingdom accounting for about 7%, Australia, Poland, South Africa and India accounting for about 2%, Canada accounting for about 1%.

In 2019, the global output of coking coal is 1.007 billion tons. In terms of national output, China accounts for 56% of coking coal output and Australia accounts for 16%. Australia and China together account for 72% of the world's coking coal production. The next largest producers are the United States, Russia, Canada and India.

China is rich in coal resources, but coking coal reserves account for only 19% of coal reserves, of which coking coal reserves with mining value are only 39.5 billion tons (accounting for 13% of coking coal reserves). These 39.5 billion tons include strong caking coal and weakly cohesive coking coal blending, of which 9.48 billion tons are coking coal, accounting for 24 percent, and fat coal is 5.14 billion tons, accounting for 13 percent. The remaining 63% are weakly cohesive coking and coal blending. It can be seen that the total amount of coking coal with mining value in China is not high, at the same time, the structural contradiction is obvious, the proportion of coking coal blending is too large, and the reserves of high-quality coking coal are relatively low.

According to the provinces of coking coal production in China, Shanxi has the largest output (47%), followed by Shandong (10%), Anhui (9%) and Inner Mongolia (6%). Shandong coking coal is dominated by high volatile coal, accounting for the largest proportion of gas coal (50.7%), followed by gas fat coal; Anhui province accounts for a relatively large proportion of gas coal, followed by 1amp 3 coking coal and main coking coal.

Nearly 80% of global demand is in Asia.

Coking coal is processed into coke, which is used as fuel for blast furnace ironmaking, and the global long-process crude steel output pattern corresponds to the demand of coking coal. Considering that electric furnace steelmaking is mainly used in the United States and other countries, this paper analyzes the global demand for coking coal by comparing the output of long-process crude steel. Long-process crude steel production in Asia accounts for 79.7%, so 80% of global coking coal demand is in Asia, followed by the European Union (7.6%) and CIS countries (5.2%). From a national point of view, the top 10 crude steel producing countries account for 90% of the global crude steel output, so the demand countries for coking coal are relatively concentrated. The largest demand is mainly China (63.99%), Japan (6.1%), India (3.9%), South Korea (3.8%) and Russia (3.7%).

Australia, the United States and other major exporters

The global supply of coking coal is relatively concentrated. Australia is the largest exporter of coking coal, accounting for half of the global coking coal trade volume (290 million tons), and its coking coal resources are good (low ash, low sulfur). Is the main international supplier of high-quality coking coal. Australian coal price is the global mainstream coking coal price reference.

Followed by the United States, Canada, Russia, Indonesia and so on, these countries are rich in reserves, stable coal quality, and the supply to the international market continues to increase steadily. The United States is rich in coal resources, accounting for 1x4 of the world's reserves, and the distribution of resources is relatively balanced. The annual output of coking coal is about 70 million tons, 80% of which is used for export. However, considering the high cost of coking coal mining in the United States, output and exports will further shrink. Exports will be reduced. Canada is rich in coking coal reserves and good quality, and the amount of coking coal exported to China has increased year by year in recent years. Russia is rich in coal reserves, with large reserves and complete varieties of coking coal resources, which are mainly exported to Japan, South Korea and Northeast China. The export pricing of coking coal in these countries generally follows the price of Australian coal.

In recent years, Mongolia, a rising star, has a total coal reserve of about 162.3 billion tons, and most of it is coking coal. The coal seam is shallow, thick and easy to mine. In recent years, with the government investment in coal mines, railways and other infrastructure, the production capacity of coking coal in Mongolia has increased rapidly, but because of its limited transportation (automobile transportation), it is mainly exported to China, and the price trend mainly depends on the impact on China's supply and demand pattern. In addition, because the exporting country is single, its price will not become the mainstream price reference in the world.

Asia is highly dependent on imports

According to China's pig iron production level, China is undoubtedly the world's largest demand for coking coal. Although China's coking coal reserves are second only to Russia, China's high-quality coking coal is scarce and structural contradictions are prominent. As a result, China is a net importer of coking coal. In 2019, China imported 74.66 million tons of coking coal, accounting for 11% of the demand for coking coal.

Among the top 10 coking coal importers, according to their long-process crude steel output in that year, India (62%) has the highest import dependence on coking coal consumption, followed by South Korea (32%). On the whole, the large steel-producing countries in Asia account for a high proportion of coking coal imports. The coking coal in the United States (mainly electric furnace steelmaking and rich in coking coal) and Russia (rich in coking coal) are self-sufficient and are not highly dependent on imports.

China has formed an import pattern of coking coal mainly imported from Australia and Mongolia and supplemented by coal from Russia, Canada and the United States.

In 2019, China's imports of coking coal totaled 74.657 million tons, an increase of 15 percent over the same period last year. From a national point of view, Mongolia and Australia account for 45% and 41.4% respectively, Russia accounts for 7%, Canada accounts for 4%, and other countries account for 2.6%.

In the first 10 months of 2020, China's coking coal imports fell 2.2 per cent from a year earlier, while structurally, Mongolian coal imports fell significantly, down 33 per cent from a year earlier. Affected by the epidemic, Mongolia's import volume remained low in the first half of the year. The speed of customs clearance increased from August to September, and imports returned to the level of the same period in previous years. From October to November, due to the second outbreak of the epidemic, customs clearance vehicles dropped again. As of the last week of November, Ganqimodu Port had an average of 163 vehicles per day, a decrease of 578 vehicles compared with the previous week. With the exception of the United States, the supply of coking coal in other countries quickly supplements Chinese demand. The volume of coking coal exported to China by Australia and Canada increased significantly in the first 10 months compared with the same period last year, while countries such as Colombia and Mozambique did not export coking coal to China before and began to export Chinese coking coal this year.

Resumption of production of global steel mills will boost trade demand

From the perspective of monthly crude steel output at home and abroad, China is little affected by the epidemic. Monthly crude steel output rose 12.7% in October from the same period last year, and cumulative output increased by 5.5% compared with the same period last year, while overseas steel mills were greatly affected by the epidemic in the second quarter. The cumulative output of overseas steel mills fell 10.7% in the first 10 months compared with the same period last year, but increased by 0.32% in October, and monthly output has returned to the level of the same period last year.

From a regional point of view, India and South Korea are better at resuming production, with monthly output increasing by 0.86% and-1.76% year-on-year, which is close to the level of the same period last year, but the monthly steel mills in Japan, the United States and the European Union are-11.66%,-15.27% and-5.44% respectively, and there is still plenty of room to increase production. The global output of crude steel in these countries and regions accounts for about 15%. With reference to the production level of the same period last year and its import dependence, it is expected that when global steel production returns to normal, the demand for coking coal will rise by 10%.

How will the internal and external price difference be narrowed?

For a long time, because of its large output, excellent quality and convenient transportation, Australia is not only the main exporter of coking coal in the world, but also the main source of coking coal imported by China. Overseas coking coal prices are mainly concerned about Australian coal prices. Since the second quarter, the import price gap of coking coal has been widening. as of December 4, the profit of importing Australian main coking coal is as high as 550 yuan / ton. The main reason for the widening internal and external price gap is: on the one hand, China's lack of import quotas, Australian coal demand dropped month-on-month. From January to April this year, China imported 19.21 million tons of Australian coal, accounting for 62 per cent of Australian coal imports in 2019. The overdraft of import quotas in advance led to a decline in Australian coal imports in the second and third quarters, while China suspended Australian coal clearance in October, resulting in almost no transactions in Australian coal exports to China, while domestic coking coal prices were rising, leading to a widening price gap between internal and external coking coal. On the other hand, overseas steel mills affected by the epidemic, not full production, also led to the current Australian coal demand is relatively weak.

We believe that in the later stage, there are two main factors that affect the internal and external price difference of coking coal: first, China liberalizes Australian coal clearance, and Australian coal imports rise. First of all, it will drive Australian coal prices to repair the price gap upward, and secondly, Australian coal imports will lead to a month-on-month increase in domestic coking coal supply, affecting the decline of coking coal futures. Finally, futures anchor Australian coal spot prices downwards. Second, overseas steel mills resume production. Combined with the previous review of the production of foreign steel mills, it can be found that the resumption of production in India and South Korea is better, and there is still some room for steel mills in Japan, the United States and the European Union to increase production. If the vaccine comes on the market next year, steel mills around the world will resume normal production, which will affect the increase in demand for coking coal. Under the assumption that China's clearance of Australian coal is stagnant, the resumption of production by overseas steel mills will lead to a rise in Australian coal prices. under the background that Australian coal prices are much lower than futures prices, it is expected to have no obvious impact on domestic coking coal futures, mainly affecting Australian coal prices. promote the convergence of internal and external price differentials. (author unit: Guangfa Futures)